FX & Money Markets Daily: EURUSD Still Supported
Today's Comment
Majors & Scandies
According to CFTC Commitments of Traders, the speculative investors increased their combined long USD position by 3.5 billion (12.7 billion versus 9.2 billion last week). It is especially versus the yen, the Swiss franc, and the pound the speculative investors have become more bullish on the dollar whereas the EURUSD contracts have changed by a relatively low number. Since Tuesday when the data was collected the euro seems to have found at least some support versus the dollar. However, since Thursday EURUSD has fallen almost two big figures, but so far nothing suggests that the pair should not continue to be supported around 146.70. There has not been a lot of news out that should affect either leg of the EURUSD cross, which suggests that the rebound of the dollar the last two trading days can be linked to the sharp fall in the oil price. We are still considering EURUSD as a 'sell on rallies', but there seems to be reasonable buyinterests around the support level mentioned above. Currently, we are viewing 149.50 as an attractive sell opportunity for EURUSD. Existing home sales from the US are due later today and our economists see a risk that there will be posted a renewed fall in the figure. This is due to further tightened credit conditions and a reduced number of mortgage applications. This week offers among other things minutes from the last FOMC meeting, consumer confidence, and durable goods orders from the US. Friday offers consumer prices and unemployment numbers from the Eurozone.
Emerging Markets
On Friday, we discussed 3 issues which were putting some pressure on EM: renewed increases in oil, ditto in EUR/USD and renewed financial worries. While the question remains whether these are just small bumps on the road to something better or whether we need to consider the possibility of something more sinister, financial markets certainly did what they could to allay our fears on Friday! EUR/USD has dropped almost 2 big figures, oil is down some 7 USD/barrel and financial stocks rose following news that the Korean Development Bank was considering investing in Lehman - a potential sign that the drop in financial stocks has reached a point where value is once again emerging. Most EM currencies benefitted on this benign background, leaving our long TRY position further in the money but also pushing our short ZAR position into loss-giving territory. We stick to both positions for now - seeing short ZAR as a good hedge for long TRY, not the least as we see the TRY performing best, come rain or shine. With the Olympics out of the picture, we now need to refocus on the financial markets in our morning comments (blast!), but thankfully the economic calendar does turn more interesting following a quiet week. Today's Hungarian rate decision should cement the outlook for Eastern European central banks reaching the end of the tightening cycle (we look for rates to be left at 8.50%), which leaves the respective currencies lacking an important support they have enjoyed in recent years. We are looking for an opportune moment to sell the CZK and the PLN.
Today's key events
- 09:30 Consumer Confidence, DKK
- 09:30 Trade Balance, SEK
- 16:00 Existing Home Sales, USD
Jyske Core Positions - Recommendations
Jyske Markets - FX Research
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The analysis is based on information which Jyske Bank finds reliable, but Jyske Bank does not assume any responsibility for the correctness of the material nor for transactions made on the basis of the information or the estimates of the analysis. The estimates and recommendation of the analysis may be changed without notice. The analysis is for personal use of Jyske Bank's customers and may not be copied.
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